Lat Am central banks turning more dovish

Central banks in several countries in Latin America are turning increasingly dovish. Policymakers in Brazil cut interest rates this month on the back of another drop in inflation and further (gradual) progress by the government on fiscal reforms. The easing cycle in Brazil will be slow to begin with but additional rate cuts seem likely in the months ahead. Elsewhere, while no central bank has followed Brazil’s lead and actually lowered interest rates, several have shifted towards an easing bias. In Colombia, the central bank has started to discuss the timing of interest rate cuts. And in Chile, monetary easing has come onto the agenda following weaker-than-expected inflation data. The outlier in all of this is Mexico. The peso has continued to fluctuate with Donald Trump’s odds of winning the US election. Even if the peso stabilises, previous falls in the currency will still push up inflation in the near term. So while other central banks in Latin America are shifting towards policy loosening, Mexico is likely to buck the trend and raise interest rates over the coming months.